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City Engineer Nanda Gottiparthy said workers are 80 percent to 90 percent done with phase two, and he expects the work to be done by the end of the year. There's still pipelines beneath a couple alleys that needs to be replaced.

Gottiparthy said complaints about brown water have gone down, but haven't gone away completely. "This second phase should reduce those complaints, but probably not eliminate all the problems," he said.

Still, the work that's been done is a great accomplishment for the city, Gottiparthy noted. "This is probably the most critical part of improving water quality in the city," he said.

The final stage of the project is estimated to cost around $2 million. City officials hope to complete that phase within the next five years.Gottiparthy said the city hasn't yet found funding for the final phase, but is trying to identify some.

Among the possibilities, City Manager Jose Antonio Ramirez said he's vying for funding through the Merced Integrated Regional Water Management Plan committee, hoping to garner $2.6 million.

Ramirez said residents are eager about the project.

"The folks are excited," he said. "We want to make sure that we are in there to get in line and get some of this money because we need it."

Ramirez said an update on the city's waterline replacement project will be given during Tuesday's council meeting.

Reporter Mike North can be reached at (209) 385-2453 or mnorth@mercedsunstar.com.